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I was thinking about withdrawing $25,000 from my $82,000 IRA to pay off debt.

Just be aware that after taxes, and if you have any other income, a $25k withdrawal will probably only be able to pay off $19k - $21k in debt - less if you have a state income tax.

I heard that being disabled is one of the exeptions from the 10% penalty. is this true, and what are the rules?

Yes. From IRS Pub 590

Disabled. If you become disabled before you reach age 59½, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.

You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.

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